Journal of Oil Palm Research Vol. 16 No. 1, June 2004, p.

1-10

THE OIL PALM AND ITS SUSTAINABILITY

THE OIL PALM

AND ITS SUSTAINABILITY
YUSOF BASIRON* and CHAN KOOK WENG*
ABSTRACT
As the palm oil industry progresses, its many aspects, such as economic, environmental and social benefits,
from its production are reviewed. More recently, sustainability has received great attention with efforts to
integrate it into the palm oil business strategy. In the sustainability framework, the economic (financial),
environmental and social aspects are reviewed for their impacts in both the short- and long-terms. The threepronged strategy of high income, value addition and zero waste is scrutinized as part of the journey towards
corporate sustainability. Doing so has once again demonstrated the benefits of the crop in supplying oil to the
world.
The paper also puts together the evidence, firstly, that the oil palm can be used as a vehicle for rural
poverty eradication in Malaysia and perhaps be used as a model for other countries with similar soils, climate
and labour availability. Secondly, that it is a steady supplier of affordable food, non-food, biocomposites,
nutritional and pharmaceutical products. And thirdly, that it is a showcase for environmental improvement.
For the latter, palm oil mills are fast becoming generators of renewable energy from their biomass and biogas.
R&D in these areas have provided new angles for increasing its economic sustainability, moving the industry
beyond the current business of just producing palm oil.
Further, new business ventures based on new R&D findings are being set up to look at product
sustainability. They include businesses such as in bioplastics, greenness of energy production, savings in
fossil fuels, reduction in greenhouse gas emissions and production from several new best developed practices,
thereby helping the industry to slow down the process of climate change.
Keywords: sustainability framework, economic sustainability, product sustainability, corporate sustainability,
greenhouse gas (GHG) reduction.
Date received: 7 February 2003; Date approved: 26 February 2003; Date revised: 16 February 2004.

100-120 spikelets attached to a peduncle from the

axil of a frond. The fruits produce two main products
- palm oil from the outer mesocarp and palm kernel
oil from the kernel within the nut.
Scanning the horizon for the current issues facing
the palm oil industry, the focus must be on
sustainable development. How can sustainability of
the crop be incorporated into this commercial
venture? Is there a business case for it? It is our
considered opinion that the time is ripe to discuss
sustainable palm oil. While much time during the
last decade was spent in understanding and
managing the economic, environmental and social
aspects of the palm oil business, only recently have

INTRODUCTION
The oil palm in Malaysia is over a century old.
Introduced as an ornamental in 1871, the oil palm
was commercially exploited as an oil crop only from
1911 when the first oil palm estate was established.
Much has been written about the crop, its products
and commercial trade (Yusof Basiron et al., 2000). The
female bunch bears about 2500-3000 fruits borne on
* Malaysian Palm Oil Board,
P. O. Box 10620,
50720 Kuala Lumpur, Malaysia.
E-mail: [email protected]

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JOURNAL OF OIL PALM RESEARCH 16 (1)

the aspects on sustainability been integrated into the

business strategy.
The paper is centred on how the sustainability
framework can be used for aligning the
environmental-friendly practices of palm oil
production. It brings together the financial and
economic, environmental and social dimensions of
the business. The approach consists of a
straightforward interpretation of the sustainability
concept that involves three important aspects.
Firstly, the high income strategy of improving the
financial, economic and social benefits, and reducing
the environmental impacts of the activities of oil
palm cultivation over both the short- and long-terms.
Secondly, in strengthening relationships and
partnerships by recognizing and working with the
employees, stakeholders and shareholders to
address their needs and those of the industry in
increasing the production of high value products
from palm oil and its products.
And, thirdly, by demonstrating the integrity and
commitment in maintaining the high standards of
the industry in its day-to-day operations by creating
zero waste by full use of its by-products thereby
reducing pollution.
It is our conviction that the industry is doing the
right thing by making sustainability a part of its daily
life. It is also our belief that the strategies identified
in the sustainability framework are for the better
development of the industry in the 21st century. In
this way, it will generate greater value for the
shareholders and Malaysian society, yet benefiting
the world by providing a steady supply of vegetable
oil and palm products.
Although the framework on sustainability
contains business values, customer focus,
management systems and stakeholder involvement,
the effort over the next few years is to make the
sustainability framework workable in the industry.

The oil palm industry has indeed started on its

journey towards corporate sustainability. The
business case is to relate the efforts in achieving the
financial and economic, process and product
sustainability. Developing this sustainability mindset
throughout the industry is an internal Malaysian
challenge that has great external implications in the
global trade of palm oil.
The paper tells of the successes and attempts in
attaining sustainability in the profitability, processes
and products, i.e. the three Ps. The framework allows
the industry to effectively turn its economic,
environmental and social strategies into mutually
beneficial undertakings that maximize value for the
operators and owners, employees, shareholders and
stakeholders. In short, it benefits society and the
world through its steady supply of palm oil for the
world market.

BRIEF HISTORY OF HOW THE OIL PALM

INDUSTRY CAME TO MALAYSIAN SHORES
The oil palm industry had a humble beginning. From
a mere four original palms introduced from West
Africa to the Bogor Botanical Gardens, Indonesia in
1848, their seeds soon arrived on Malaysian shores
in 1871. The rubber companies over the next four
decades saw their planters learning how to grow the
crop in the country. The R&D undertaken soon
showed the potential of the new crop. Following this,
the first commercial planting was done in 1911 at
Tenammaran Estate, Kuala Selangor. Such was the
success of the crop that the area expanded quickly,
the most rapid increases occurring during the 1930s,
1970s and 1980s. The growth in area during the
various decades of the last century in Malaysia is
shown in Table 1.

TABLE 1. AREA OF OIL PALM PLANTING AND GROWTH IN THE DECADES OF THE LAST CENTURY

Years in decades

Hectares

% Growth

1870-1910
1920
1930
1940
1950
1960
1970
1980
1990
2000

< 350
400
20 600
31 400
38 800
54 638
261 199
1 023 306
2 029 464
3 376 664

14.2
5 050.0
52.4
23.5
40.8
378.0
291.8
98.3
66.3

Source: Adapted from Malaysian Oil Palm Statistics (2001).

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THE OIL PALM AND ITS SUSTAINABILITY

At the end of 2000, the area stood at 3.376 million

hectares, producing 10.842 million tonnes of palm
oil, 3.162 million tonnes of palm kernel, 1.384 million
tonnes of palm kernel oil and 1.639 million tonnes
of palm kernel meal.

establishment in 1979. On 1 May 2000, PORIM was

merged with the Palm Oil Registration and Licensing
Authority (PORLA) to form the Malaysian Palm Oil
Board (MPOB). The mission of MPOB is to support
the well-being of the oil palm industry in Malaysia
in all aspects of its activities through research,
development and services.

THE OIL PALM AS A VEHICLE TO

ERADICATE RURAL POVERTY

The goals of MPOBs R&D are to:

improve the production efficiency and quality
of palm oil, kernel oil and biomass products;
expand and improve the current uses for oil
palm products;
find new uses for oil palm products as a
substitute;
promote the use, consumption and
marketability of oil palm products; and
ensure that the oil palm industry is
environmentally-friendly.

In the early 1960s, the returns from oil palm were

found to be better than rubber and most of the
plantation companies soon had a mix of both crops
as their core business. It was Tun Abdul Razak
Hussein, the then Deputy Prime Minister of
Malaysia, who called for greater diversification into
oil palm (Abdul Razak, 1968). With diminishing
returns from the then two major commodities of the
country - tin and rubber - oil palm should be used
as the vehicle to eradicate rural poverty. The
governments three rural development agencies Federal Land Development Authority (FELDA),
Federal Land Consolidation and Rehabilitation
Authority (FELCRA) and Rubber Industry
Smallholders Development Authority (RISDA) were responsible for planting oil palm with large
areas of land that were rehabilitated or newly
opened.
Landless people were placed as settlers in the
newly opened land schemes. The government
provided them housing and infrastructure including
community halls, schools, health clinics, shops and
roads. Initially, the government supported their
livelihoods until the oil palm matured when the
income from the crop was sufficient to pay off their
loans. In doing so, the government was able to
alleviate rural poverty using the oil palm as the
vehicle to do so.
The palm oil industry has a firm belief that R&D
provides the basis for crop improvement and the
expansion in trade. The private sector has had a long
tradition of R&D in agriculture, as alluded to earlier,
by its research in oil palm cultivation since the turn
of the last century. Most of the R&D then were
upstream research on cultivation.
Initial R&D into the crop was done by the
government sector, carried out by the Department
of Agriculture. Together with the private research
companies of the major plantation groups, the work
included collecting breeding materials and
experimentation in breeding, agronomy and palm
oil chemistry.
It was in 1969 when the Malaysian Agricultural
Research Development Institute (MARDI) was
established that the mandate for oil palm research
was taken over from the Department of Agriculture.
The task was later handed to the Palm Oil Research
Institute of Malaysia (PORIM) following its

MPOB 2004

Thus, it can be seen that right from the beginning,

both the government institutes, leading through to
MPOB in later years, and the private sector through
their R&D in their plantation houses have been
actively collaborating. Together they spearheaded
the palm oil industry well in the past and are
determined to do the same in the 21st century.

CURRENT STATUS OF THE PALM OIL

INDUSTRY IN TERMS OF FOOD, NON-FOOD,
BIOCOMPOSITE, NUTRITIONAL AND
ENVIRONMENTAL IMPROVEMENT IN
SUSTAINABLE DEVELOPMENT
The palm oil industry in Malaysia will continue to
be dependent on its traditional edible and non-edible
uses. It is always the industrys wish to move along
the traditional track as well as on to novel tracks by
creating and exploiting new strategic business areas.
The current status and future direction on the use of
palm oil, palm kernel oil, biomass and carbon credit
trading from sequestration will be presented here.
Food Products
Traditionally, about 80% of palm oil is for edible
use and 20% for non-edible use such as oleochemical
manufacture. The traditional products for food are:
as a medium for frying. Palm olein has several
advantages as it is resistant to oxidative
deterioration, suffers lower polymer
formation, has vitamin E as a natural
antioxidant, and can be blended with other
vegetable oils to better suit colder climate use;
as shortenings. Palm oil, as a major component
of shortenings, margarines and vanaspati, is
3

JOURNAL OF OIL PALM RESEARCH 16 (1)

also used in tailored applications for bakery

products and confectionery fats; and

bunches (EFB) and pruned fronds. During

replanting, large quantities of trunks and fronds up to 75 t ha-1 dry matter - are produced. The dry
weight of biomass fibre available each year, as
alluded to earlier, is always more than that of palm
oil. When manufactured into medium density
fibreboard (MDF), the product is weight for weight
more valuable than palm oil. It implies that if fully
exploited, the oil palm industry can easily triple its
returns besides providing a new industry and
employment.

as novel food products. Palm oil is used in

reduced fat spread, ice cream, coffee
whiteners, whipping cream, filled milk,
mayonnaise and salad dressings, trans fatty
acid-free formulations, palm-based cheese,
santan (coconut milk) powder, microencapsulation, red palm oil/olein.
Non-Food Products

Nutritional, Nutraceutical and Pharmaceutical

The non-food application is only about 20% but

significant because of the high added value. Palm
oil can be used directly or indirectly as oleochemicals.
The products are:

Palm oil contains about 1% minor components.

The major constituents are carotenoids, vitamin E
and sterols.

direct use. Soap, epoxidized palm oil, polyols

and polyurethanes, polyacrylate coatings,
printing ink, engineering thermoplastics, fuels
(as diesel substitute) and drilling mud (again
as a non-toxic substitute for diesel); and

Carotene. The carotene concentration is

around 500-700 ppm. Carotene has been
concentrated from palm oil successfully. The
concentrate is rich in pro-vitamin A which is
normally destroyed during processing. The
major carotenes in the carotenoid concentrate
are alpha- and beta-carotenes and they can be
diluted to various concentrations, from 1%30%, for commercial applications such as food
and food colourants, nutraceutical and
pharmaceutical, nutritional and health
applications.

as oleochemicals. Fatty acids, fatty esters, fatty

alcohols, fatty nitrogens, glycerols.
In addition to the above, there are many
applications in novel oleochemical-based products:
food industry. Monoglycerides in emulsion
food products such as margarine, spread and
salad dressing;

Vitamins. The vitamin E content in palm oil is

unique in that it is about 600-1000 ppm. It is
present as tocotrienols (70%) rather than
tocopherols (30%). It confers on the oil a
natural stability against oxidation and a longer
shelf-life as well as a potent ability to reduce
LDL-cholesterol and anti-cancer properties.
The commercialization of palm vitamin E is
in the final stages of preparation and there is
a huge market for it in both human health
foods and animal feeds.

medium chain triglycerides. Medium chain

triglycerides from palm kernel oil are used in
the cosmetics industry, infant and health
foods;
food wrapper. With the banning of
polyethylene coated brown paper as food
wrapper, a palm-based coating can now be
substituted;
personal care products. These include the
whole range of cosmetics and toiletries;

Sterols. Palm oil also contains 250-620 ppm

sterols. Beta-sitosterol is the major constituent
at 60%. It is potentially hypocholesterolemic.

lubricants/greases. As substitutes for mineral

oil lubricants; and
agrochemicals. Surfactants derived from basic
palm-based oleochemicals are used as inert
ingredients in pesticide formulations - wetting
and dispersing agents, emulsifers, solvents,
carriers and diluents.

Environmental
The oil palm industry is presently using its EFB
waste for mulching and palm oil mill effluent
(POME) as fertilizer. During replanting, the trunks
and fronds are chipped and left in the inter-rows as
mulch under the zero-burn practice. In the mills, the
fibre, shell and EFB are burned as fuel for the boilers.
Thanks to continuous R&D into new uses, most of
the wastes are now considered co-products,
especially as energy renewable resources. In
particular, three products - palm oil, biomass and
biogas - are being encouraged to be used as fuels.

Biocomposites
The oil palm is a prolific producer of biomass.
Oil constitutes only about 10% of the palm
production while the rest is biomass. The biomass
is available throughout the year as empty fruit

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THE OIL PALM AND ITS SUSTAINABILITY

Palm oil can be burnt directly as boiler fuel or as

diesel for power generation or vehicle propulsion. In
addition, palm oil can be emulsified to palm diesel
or methyl diesel. The biomass from the mill, such as
EFB, fibre and shell, can be used for electricity
generation. To date, more than 10 out of the countrys
360 mills are applying to supply electricity to Tenaga
Nasional Berhad. New technologies are now
available to harness the biogas from effluent ponds
for power generation. The total value of biogas energy
available from the mills is estimated to be RM 1
billion, or US$ 0.263 billion (1 US$ = RM 3.80). It is
also estimated that if all the biogas is used for the
mill operation, then all the fibre and shell can be freed
for generating electricity for sale.
Besides the use of biomass and biogas for power
generation, savings can be made in the diesel
consumption. There is yet another untapped source
of wealth that the industry is now actively pursuing.
Under the Kyoto Protocol, which comes into effect in
2008, the industry should be able to claim carbon
credits from the reduction in greenhouse gas (GHG)
emission from reduced diesel use and also from the
sequestration of carbon dioxide by the oil palm.
Although Malaysia as a developing country is not
required to reduce its emissions, it has nevertheless
committed itself to sustainable development and will
have to look at energy efficiency and renewable
energy resources. The oil palm industry with its
abundance of biomass offers a tremendous
opportunity for the country to help reduce GHG
emission and contribute to slowing down climate
change.

reduced risks, higher morale and stronger corporate

reputation.
Thus, economic sustainability adds new
dimensions to the concept for future business
instead of the mere financial profitability of old.
Economic sustainability looks beyond the current
business horizon by focusing on the forces that will
shape the markets in the future. The social and
environmental trends are now playing increasingly
important roles in defining the markets. By
integrating profitability, environmental and social
considerations into its business planning, the
industry will be better prepared to manage the risks
and capture the opportunities that the future will
bring.
The Malaysian palm oil industry is economically
big and diversified. According to the latest statistics,
the planted area at the end of 2002 stood at 3.67
million hectares. This represents about 60% of the
total 6.075 million hectares designated for
agriculture under the National Agriculture Plan
(NAP3) (1998-2010).
Also in the sustainability framework, the socioeconomic aspect needs to be emphasized. Here as
at the end of 2001, the distribution of the planted
area by ownership and management was private
estates 58.9%, FELDA 20.4%, state schemes 7.1%,
FELCRA 4.0%, RISDA 1.2% and smallholders 8.6%.
Further at the end of 2001, the industry employed
over half the agricultural work force of 1.399 million
people. The industry had in the past generated
about RM 22.6, 19.2, 14.9 and 14.1 billion in foreign
exchange in 1998, 1999, 2000 and 2001, respectively.
This was equivalent to US$ 5.95, 5.05, 3.92 and 3.71
billion respectively (1 US$ = RM 3.80). The
agricultural sector led by oil palm production has
continued to enjoy substantial financial gains. The
financial benefits from the palm oil industry had
indeed helped the country to weather the effects of
the melt down of the Asian Financial Crisis in
1997/8. All these pointed to the beneficial effect of
the palm oil industry as a vehicle to eradicate rural
poverty.
The financial benefits derived from oil palm
cultivation have been reported in other countries.
They have ventured into the planting of the crop
and reaped their harvests. They have also
encouraged further expansion in the crop area. Over
the last decade between 1990-2000, the major palm
oil producing countries have steadily increased their
production.
At the end of 2000 for example, the respective
mature areas, in million hectares, were Malaysia
(2.941), Indonesia (2.014), Nigeria (0.360), Thailand
(0.199), Ivory Coast (0.139), Colombia (0.081), and
many other countries with smaller oil palm areas
(0.731). The world total mature area as at 2000 stood

ECONOMIC SUSTAINABILITY
From the discussion, the governing objective for
maximizing value is to guide investment to generate
the greatest returns and to position the industry for
continued growth. Therefore by incorporating
sustainability into the palm oil business, there must
be taken into account the long-term profitability,
benefits and impacts of the products and processes.
In all circumstances, the protection of the environment
and care of the health and safety of employees,
communities (where the operations are located) and
the local consumers (where the products are exported)
are given the top priorities.
As sustainability is a complex issue, how does one
measure it? It involves the earning of profits in
relation to the effort in protecting the environment,
finding ways to use the resources more efficiently,
making the work place safer, enhancing the skills of
employees through training and working experience.
All these activities return value in some form or other
such as lower cost by recycling, higher quality,

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JOURNAL OF OIL PALM RESEARCH 16 (1)

at 6.563 million hectares. Despite the large

production of palm and kernel oils, the oil palm, as
a consequence of its superior productivity (about
five to 10 times more oil per hectare than its nearest
oilseed competitor, the soyabean) occupies the
lowest area among the vegetable oil crops (Table 2).

The response from palm oil and other vegetable

oils and fats producers to meet this export demand
created by the increased population growth is by
planting new areas. The increasing trends in
production are shown in Tables 4 and 5, respectively.
Looking at the two tables, oil palm seems the only

TABLE 2. AREAS UNDER CULTIVATION BY VARIOUS VEGETABLE OIL CROPS IN 2000

Crop

Production (106 t)

Oil ha-1 yr-1 (t)

Area (106 ha)

25.483
9.630
14.237
21.730

0.46
0.66
1.33
3.30

55.398
14.591
10.704
6.563

Soyabean
Sunflower
Rapeseed
Palm oil

% Of total area
63.48
16.72
12.26
7.52

Source: Chan (2002).

likely crop to produce the steady increase in supply

to meet the demand. The obvious losers will be the
producers of animal fats which production
contribution is expected to decline from 19.2% in 2000
to 15.8% in 2020.
Soya oil, from its pole position of 22.1% in 2000
will drop slightly to 21.1%, having been overtaken
by palm and kernel oils by 2015. Therefore, enhancing
the sustainability of its production process will
accord the palm oil industry many opportunities to
increase its shareholder value. For example, besides
providing employment and infrastructure
development in the rural areas, the palm oil mills
can also generate electricity from their surplus
biomass and biogas. Based on the by-products from
the 360 mills in Malaysia, the potential electricity
generation is shown in Table 6.
To improve the oil palm sustainability, our effort
now is to improve the efficiency in power generation
and its use. Improvement in the technology such as
continuous sterilization has reduced the use of steam
and resulted in better extraction. Through continuous
sterilization, the DOBI index is higher and this will
reduce the use of bleaching earth in the refinery. The
spent bleaching earth, which is another waste, is now
minimized. The use of scrubbers has reduced black
smoke from the incinerators. Process improvement
will lead to reduce consumption of water through

There should therefore be more forest conserved

if oil palm is planted instead of the other oilseed
crops. The economic sustainability of palm oil as a
business is the single most important factor
responsible for the expansion of oil palm as a
commercial crop. This is shown not only by Malaysia
but by most of the other countries straddling the
equator throughout the world. Palm oil today is a
global powerhouse in the worlds oils and fats trade.

PROCESS SUSTAINABILITY
Palm oil production in Malaysia is one of the highest
among the producing countries and this is attributed
to the climate and good management arising from
R&D. The country, with a small population of only
about 22 million, has been exporting about 90% of
its production.
The priority of Malaysia presently is to ensure
that the yearly surplus of palm oil is exported to
satisfy the growing market demand of oils and fats
worldwide which is expected to rise to about 58
million tonnes by 2020 as projected in Table 3. The
large export market for oils and fats signifies that
good prospects still exist for growing oil palm that
needs so little land compared with other oilseed
crops.

TABLE 3. WORLD OILS AND FATS CONSUMPTION, PRODUCTION AND EXPORT FROM 2000-2020

Year

Consumption (kg caput-1)

Total consumption (106 t)

2000
2005*
2010*
2015*
2020*

18.3
19.3
20.9
22.3
23.8

110.5
121.4
138.9
156.4
175.3

Note: * Estimate.
Sources: MPOB (2001); Oil World (2001).

MPOB 2004

Production (106 t) Export (106 t)

111.2
127.7
139.4
156.7
175.7

36.7
42.1
46.0
51.7
58.0

THE OIL PALM AND ITS SUSTAINABILITY

TABLE 4. WORLD CONSUMPTION OF MAJOR OILS AND FATS (106 t)

Year

PO

PKO

SBO

SFO

RSO

AF

Total

2000
2005*
2010*
2015*
2020*

19.8
23.5
29.0
34.9
40.6

2.5
3.1
3.6
4.3
4.9

24.8
26.5
30.3
33.2
37.0

9.4
10.8
12.5
14.5
16.6

13.9
16.3
17.5
19.6
22.1

21.4
22.4
24.2
25.9
27.9

110.5
121.4
138.9
156.4
175.3

Notes: *Estimate; PO = palm oil; PKO = palm kernel oil; SBO = soyabean oil; SFO = sunflower oil; RSO = rapeseed oil;
AF = animal fats.
Sources: MPOB (2001); Oil World (2001).

TABLE 5. WORLD PRODUCTION OF MAJOR OILS AND FATS (106 t)

Year

PO

PKO

SBO

SFO

RSO

AF

Total

2000
2005*
2010*
2015*
2020*

20.5
25.7
29.2
36.1
40.6

2.5
3.2
3.6
4.3
4.9

24.6
26.5
30.4
33.2
37.1

9.5
10.8
12.5
14.6
16.6

13.9
15.2
17.5
19.7
22.2

21.4
22.4
24.3
25.9
27.9

111.2
123.7
139.4
156.7
175.7

Notes: *Estimate; PO = palm oil; PKO = palm kernel oil; SBO = soyabean oil; SFO = sunflower oil; RSO = rapeseed oil;
AF = animal fats.
Sources: MPOB (2001); Oil World (2001).

TABLE 6. THEORETICAL POWER GENERATION USING BIOMASS FROM OIL PALM MILLS

Biomass

Fibre
Shell
EFB
Biogas

% To FFB

FFB (kg t-1)

Calorific value
(kJ kg-1 dry wt.)

H2O
(%)

Energy
(MJ)

Electricity
(k Whr)**

14
8
23
-

140
80
230
14 Nm3

19 220 (11 350)*

21 440 (18 840)*
20 470 (8 160)*
13 818 (60% CH4)

40
10
50
-

1 589
1 507
1 306
193

441
418
362
54

Notes: (*) Indicates the calorific value of the sample at the moisture content in the moisture column; (**) = 1 kWhr equivalent
to 3.6 MJ; FFB = fresh fruit bunches; EFB = empty fruit bunches.
Source: Chan et al. (2002).

the evaporation process by which the water is

condensed and recycled. The volume of effluent is
reduced and the resultant semi-solids readily used
as fertilizer substitutes.
Thus, though the milling generates both solid and
liquid by-products, the many innovative treatments
that are being investigated will reduce their
environmental impact and often result in usable byproducts. The milling produces GHG when diesel
is used. The new processes with energy produced

MPOB 2004

from its own biomass more efficiently have

substituted more and more for diesel, cutting down
emissions. Further, the oil palm is generally known
as a net-sequester of carbon dioxide over its 25-year
growth cycle. In 2001, based on the area planted, the
estimated net carbon sequestrated was equivalent
to 90 million tonnes carbon dioxide annually. In
effect, the crop helps to eliminate GHG from the
atmosphere. The savings in reduced use of diesel and
reduction in GHG are shown in Table 7.

JOURNAL OF OIL PALM RESEARCH 16 (1)

TABLE 7. POTENTIAL SAVINGS IN DIESEL USE AND REDUCTION IN GREENHOUSE GAS (GHG) EMISSION
FROM USE OF BIOMASS IN THE 360 MILLS IN MALAYSIA

Biomass

Savings in diesel (106 litres)

GHG reduction (106 t)

415
520
752

0.573
0.719
1.040

Fibre and shell

EFB
Biogas
Sources: Chan (2002); Ma (2002).

Through environmental commitment, the

industry will continue to extend the consideration
of issues and that of the stakeholder concerns to
better represent the other two aspects of economic
and social dimensions of sustainability development
of the industry.

example, in biotechnology for biodegradable plastics

from palm oil. Our customer focus and leadership
in product design have dramatically reduced
material consumption. We have examined valueadded throughout the life cycles of the products and
are committed to recycling. Product stewardship, a
concept of responsibility for our products
throughout their life cycles, is central to the
industrys approach to business. To this end, we have
supported life cycle inventory studies on palm oil
from mass balance and energy considerations to
provide a final picture on the greenness of the
products manufactured.
Land use and biodiversity are important
considerations for the industry. We are mindful of
the employee and community concerns for the future
of plantations. There is also interaction with the
stakeholders, local authorities and environmental
leaders so that any eco-tourism aspects of the
plantation should be explored. We want to protect
the countrys image as one of the 12 mega
biodiversity centres of the world. In effect, we are
very concerned about the negative image of the
industry clearing pristine rainforest and causing the
loss in biodiversity. The industry must categorically
state that Malaysia, over the past decade from 19902000, as shown in Table 8, had protected its forests.
As a matter of fact, the forested area in the country
had improved from 74% to about 82% out of the total
land area of 32.86 million hectares.

PRODUCT SUSTAINABILITY
Producing sustainable products makes good
business sense. MPOB as the custodian of the palm
oil industry is fostering research to meet the ever
evolving needs of our consumers. This is good for
the shareholders, stakeholders, society and the
world. The R&D have benefited society in that palm
oil products, being environmentally-friendly and
biodegradable, are now utilized more efficiently.
Through recycling of, say, EFB and effluent, there
are savings in mineral fertilizers, resulting in palm
oil products incurring less fossil fuel use in their
production and reducing the GHG emissions. Many
of the end products being biodegradable, e.g.
bioplastics, food wrappers, palm oil polyols, can now
compete with the conventional products from petrochemicals.
We have established strategic alliances with
multinational companies and the world renowned
universities to work together to develop products
for the market. The industry continues to assume
the leadership role in these partnerships, for

TABLE 8. STATUS OF FOREST, TREE CROPS AND PARKS IN MALAYSIA (106 ha)

Year

Forest

Tree crops

Parks

1990
2000

18.24
20.20

4.60
4.80

1.50
1.83

Note: ( ) = Figures in bracket indicate % based on total area in Malaysia of 32.86 million hectares.
Sources: Chan (2002); MPI (2001).

MPOB 2004

Total
24.34 (74.07)
26.83 (81.65)

THE OIL PALM AND ITS SUSTAINABILITY

Globally, the industry is fully aware of the

environmental, health and safety standards on food
set by the importing countries. The increase in oil
palm area vis--vis the declines in areas of the other
tree crops over the last decade is provided in Table 9
to dispel the unsubstantiated claim by palm oil
competitors and environmentalists that the country
has been clearing its forests for the crop.
It must again be categorically stated that over the
past decade 1990-2000, the bulk of the increase of
about 1 million hectares of palm oil land came mostly
from the conversion of ex-rubber, cocoa and coconut
areas. There is also rehabilitation of idle lands which
is not documented.

Environmental management systems (EMS) will

be implemented to improve the operation at each
facility and to strengthen the readiness for
emergency responses and raise the overall
environmental performance. All facilities, including
estates, mills, refineries and manufacturing plants,
will eventually be certified to ISO 14001. Already
many of these operation centres have obtained the
ISO certification and many others on the way to get
theirs. Implementing EMS is a key strategy in
moving towards greater sustainability. Targeting
efforts to minimizing climate change is reflected in
the industrys effort to reduce emission from its
production, increase its energy efficiency, and

TABLE 9. CHANGES IN AREAS OF PLANTATION TREE CROPS (106 ha)

Year

Oil palm

Rubber

Cocoa

Coconut

Total

1990
2000

1.984
3.377

1.823
1.430

0.416
0.078

0.315
0.108

4.538
4.993

Source: Chan (2002).

promote more efficient use of its resources. A good

example is that of MPOB setting up a pilot plant to
extract phenolics from POME for the production of
antioxidants.
The industry is developing and fine-tuning the
methods for measuring and monitoring the GHG
inventory. There are global targets for GHG emission
to be set if the palm oil industry is to excel though
Malaysia is not required as a developing country to
have emission reduction targets at present. Being
proactive, the industry has started in its journey on
GHG emission reduction. In addition, the
programme allows bankable improvements in GHG
emission to be traded in the carbon exchange market.
This is to encourage the industry to go beyond its
annual GHG reduction goals. Resource stewardship
is a fundamental practice that offers savings both
for the environment and bottom line. Given the
energy, capital and materials required for the
industry to produce palm oil and its products, the
effort to produce the products more efficiently will
be given emphasis. Gains can be made from energy
efficiency, water conservation, recycling, alternate
material use, raw material management and many
others. We believe that as long as we are vigilant we
are on the right track to produce the palm oil
dedicated to the market requirement.
Pollution prevention is best done by satisfying
or exceeding the regulatory requirements or
demands. Where possible we will strive for 100%
compliance. In the case of non-compliance, the
necessary steps must be taken with cooperation from
the relevant authorities, employees and community.
Likewise, for product stewardship, the use of life

It can be seen that the total area of tree crops of

4.993 million hectares showed that in the decade
from 1990-2000, the net gain of 0.455 million hectares
is still within the 6.075 million hectares designated
for agriculture as specified under the NAP 3 (19982010).

CHALLENGES FOR THE FUTURE

The industry has worked to continuously improve
its financial performance by setting high standards
for growth and value maximization. Maximizing
value means that the industry must challenge its
traditional strategies and align its resources with the
opportunities that have the greatest value creation
potential.
Risk management of unanticipated events such
as natural fires, accidents and floods, and the liability
claims arising from them may have negative impacts
on employees, operation and financial return. In
implementing the sustainable framework for the
industry, new requirements for compliance and
monitoring will minimize the cost of risks.
As loss prevention engineering and an insurance
programme as well as environmental, health and
safety (EHS) management, compliance monitoring
will minimize the cost of risks. Economic
performance metrics will always be updated and this
means the evolution of measures to gauge the
progress in increasing shareholder value. Improved
financial performance will always be the priority
area to enhance corporate value and sustainability
both in the short- and longer-terms.
MPOB 2004

JOURNAL OF OIL PALM RESEARCH 16 (1)

Competitive Edge in the Malaysian Palm Oil Industry.

19-20 March 2002. In press. 17 pp.

cycle analysis (LCA) to quantify the use of materials

and energy as well as environmental interaction of
our products will be given more focus. Product
design, process improvement and recycling are all
part of LCA and these involve close cooperation with
all the stakeholders. LCA leading to eco-labelling
(EL) allows the industry to improve its production,
in the process discovering new and better products
which are more sustainable. R&D will cover the
whole value chain spectrum from raw material
acquisition and production, through product and
process development to, ultimately, end-use and
disposal of the products. MPOBs R&D will continue
to spearhead the industry efforts to increase
productivity and quality and reduce the cost. Finally,
the triple economic, process and product
sustainability goal is to be achieved.

CHAN, K W; CHOW, M C; MA, A N and YUSOF

BASIRON (2002). The global challenge of GHG
emission reduction: palm oil industrys response.
Proc. of the 2002 National Seminar on Palm Oil Milling,
Refining Technology, Quality and Environment, 10-20
August 2002, Kota Kinabalu, Sabah. 12 pp. In press.
MPOB (2001). Oil Palm Statistics. 21st edition, MPOB,
Bangi. 131 pp.
MPI (2001). Report on Malaysian Primary Commodities.
Ministry of Primary Industries Malaysia, Ninth
Issue, December 2001. 243 pp.
OIL WORLD (2001). Oil World Monthly. January
2001.

REFERENCES
MA, A N (2002). Oil palm based project types:
biomass, biogass and biodiesel. Proc. of the First
Industry Workshop: Carbon Finance for the Oil Palm
Sector. 25-26 February 2002. 6 pp. In press.

ABDUL RAZAK HUSSEIN (1968). Opening address.

Oil Palm Development in Malaysia (Turner, P D ed.).
Incorporated Society of Planters, Kuala Lumpur.
p. 1-17.

YUSOF BASIRON; JALANI, B S and CHAN, K W

(2000). Advances in Oil Palm Research. Volume I and
Volume II, MPOB, Bangi. p. 1-782, 783-1526.

CHAN, K W (2002). Oil palm sequestration and

carbon accounting: our global strength. Proc.
Malaysian Palm Oil Association Seminar on R&D for

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